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Economics

Q1 results for builders mixed; Horton announces smaller “express homes”

New home builders are seeing mixed results of late, and some are scrambling to answer weak first time buyer demand.

new home builder

Thomas Lawler, former senior vice president of Fannie Mae, and founder of Lawler Economic & Housing Consulting LLC, summarized the latest builder results for the first quarter. The nation’s largest home builder, D.R. Horton, reported the first quarter net home orders, were up from the comparable quarter of 2013. The 2014 quarter ended March 31, and totaled 8,569, which is up 8.8 percent from last year’s totals.

Horton’s average community count and home deliveries were both up. Their community count was up by 11 percent compared to 2013, whereas their home deliveries totaled 6,194, up a considerable 13.4 percent from the comparable quarter. The average sales price was $271,230, up 11.8 percent from a year ago. The company also experienced an increase in order backlogs, up 5.3 percent from last March totaling 10,059 orders. The company’s sales cancellation rate, however, remained the same as last year at 19 percent.

Horton announces “express homes”

According to Calculated Risk’s Bill McBride, this is in response to an overall weak demand from first-time home buyers, partly attributed to the home price increase over the past two years. McBride writes, “Horton announced in its conference call that is initiating a new product line called ‘express homes,’ which will be smaller and priced lower than its current product lines and will be targeted to first-time buyers.”

McBride added, “First-time buyers represented 42 percent of the purchase mortgages handled by its mortgage subsidiary last quarter, down from 50 percent in the comparable quarter of 2013.”

PulteGroup says orders are down

PulteGroup, the nation’s second largest home builder, reported net home orders for the end of the first quarter at a total of 4,863, down 6.5 percent from the comparable quarter of 2013. Even though net orders were down, the company said that absorptions per community were up from last year. McBride says this is due to the fact that Pulte has focused more on returns and less on expansion. Home deliveries were also down this quarter. Pulte reported a total of 3,436, down 10.4 percent from comparable quarter of 2013.

The company’s order backlog was also down at the end of March at 7,199, down 10.5 percent from last year. McBride notes, “company officials noted that absorption rates per community were up significantly from a year ago in its lower-priced Centex division, but that this gain mainly reflected the strong Texas market, and not strength in first-time buyer demand.”

Ryland reports home orders are up

Finally, the Ryland Group, the nation’s eighth largest home builder reported that net home orders were up at the close of the first quarter. They reported 2, 186, up 6.5 percent from 2013. Ryland’s community count was also up 18.8 percent from last year, but their average sales absorption rates were down by over 10 percent. Their home deliveries and order backlogs were both up compared to 2013’s figures. Home deliveries totaled 1,470, up 11.8 percent from 2013, while their order backlog totaled 3,342, up 6.6 percent from last year. Ryland owned or controlled 39,482 lots at the end of March, up 30.3 percent from last March and as astonishing 69.5 percent increase from two years ago.

Jennifer Walpole is a Senior Staff Writer at The American Genius and holds a Master's degree in English from the University of Oklahoma. She is a science fiction fanatic and enjoys writing way more than she should. She dreams of being a screenwriter and seeing her work on the big screen in Hollywood one day.

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